Letter No.93
25 January, 1998

11 December 1998

Treasury is predicting slow economic growth for NZ in 1999 with jobless numbers swelling. It says unemployment will increase by 17,000 people by March, hitting 8.7%. Unemployment is not expected to drop significantly until 2001. By then, Treasury expects we will be back to the same percentage of the workforce being unemployed as we have today.

The National and Labour parties argue over the number of students unable to obtain the community wage because of the new bureaucracy. Labour's Steve Maharey says "a reliable source" tells him Work and Income NZ has not processed 20,000 student applications. He says it is because WINZ staff hasn't been able to cope with the rush to commence operations on October 1^st.

WINZ Minister Roger Sowry says there are less than 5,000 unprocessed claims. He says students making mistakes filling out application forms are the most common reason for the delays. Meanwhile, president of the Polytechnics Student Union, John Barkness estimates there are 12,000 students experiencing delays. He says he is aware of many students going three weeks without income.

12 December 1998

Overall manufacturing activity in NZ continues to decline for the third consecutive quarter, according to Statistics NZ.

13 December 1998

The 1,000 forest workers who have lost their jobs this year are just the tip of the iceberg according to Wood Industry Union national secretary Jim Jones. Jones says thousands of downstream jobs have also been lost as contract workers and people in timber processing, transport and engineering support services are no longer needed. Jones points the finger at government policies implemented in the late 1980's, which saw forests sold on the basis that private enterprise would invest more and create value added products and more jobs. He says the exact opposite has occurred.

14 December 1998

Consumers prices are falling in France, Germany and Japan. And the Bank of England has cut its interest rate another 0.5% apparently because it is on track to undershoot its 2.5% inflation rate target.

15 December 1998

Greece comes to a standstill after two weeks of protest culminate in a general strike. The backlash comes against the government's proposed austerity plans that it hopes will qualify Greece to join the European Monetary Union in 2001. Services have been disrupted for public transport, state banks, schools, the state airline and some ports. The government says it will continue its programme of cutting welfare benefits and selling off state assets, regardless of the protests.

South Korea appears to be making headway on its economic recovery. In light of its foreign reserves rebounding and pledges by its conglomerates to streamline, investors are returning to the nation which was at the eye of the Asian economic collapse. The IMF has approved a new $US1.02 billion loan after South Korea made arrangements to repay a previous $US2.8 billion loan. Unemployment is still at record levels.

The world's largest oil company, the Royal Dutch/Shell Group announces it will not merge with another oil company to compete with the newly merged Exxon/Mobil. Instead, Shell plans to maintain profitability by selling off its less profitable operations and by making "substantial" job cuts, further to the 4,000 job cuts it recently announced.

An ASEAN nations summit calls for the reform of international financial and monetary institutions. Vietnamese PM Phan Van Khai says that globalisation has provided new partners for development but leaves the weaker host economies in a vulnerable and disadvantaged position because of uneven competition. Malaysian PM Mahathir Mohamad reiterates his criticism of currency traders and re-explains why his country has imposed currency controls.

Also at the ASEAN summit, Japanese PM Keizo Obuchi announces that Japan is making available nearly $10 billion for loans to ASEAN members at 1%/yr interest over a 40 year term. The loan money is tagged for infrastructure projects such as roading, bridge building, airports and power stations. It's not all altruism on Japan's part the loans are tagged with the requirement the projects be contracted by Japanese firms.

Looking at the first quarter of 1999, most economists are more pessimistic about the NZ economy than they were three months ago. The NZ Institute of Economic Research says that most private sector economists now think NZ may even be in for another quarter of recession. Deutsch Bank, BNZ and Bankers Trust are now predicting very slow growth of no more than 0.2% for the first quarter, and low growth throughout 1999. The decline in the forecasts is primarily based on the slowing of the economies of our trading partners.

16 December 1998

In a move to lighten the burden for students repaying student loans, ministers Wyatt Creech and Max Bradford announce a new policy to cut the interest rate on money borrowed during the period they are studying, before they are out working. The rate cut is not specified but the ministers say it may be as much as 25% less than the base rate. University Students Association researcher David Choat points out that a decrease in interest from 7% to 5.7% would mean a mere $2/wk savings on interest on a typical $10,000 loan.

The Affco meat processing plant in Moerewa lays off 109 night shift workers. Chief executive Ross Townsend says the move is because there is not enough work with farmers are holding back stock hoping prices will rise. Townsend says he is optimistic stock numbers will increase and the workers would be re-employed within four weeks.

Federated Farmers' Northland president Ian Walker denies that farmers are holding back stock, saying that when stock are ready, they're ready. Meat Workers Union national secretary Graham Cooke is critical of Affco's timing, saying the pre-Christmas lay-off is a cynical move to avoid paying people their statutory holidays. Clarke: "Rather than share work between the two shifts and keep loyal workers employed, the company has decided to treat workers as a commodity to be used when it sees fit."

17 December 1998

Fletcher Challenge Forests announces it will reduce the workforce at its Kawerau sawmill and remanufacturing plant by 100 people. The plant currently employs 230.

Some students applying for the community wage say they are not receiving adequate service from WINZ. Students at Waikato and Massey report incidences of having no word after four weeks from WINZ regarding their applications.

Business confidence, according to the latest National Bank survey, is at a four year high. About 44% of responding businesses expect things to get better in 1999.

18 December 1998

Funding for vocational services for people with disabilities will be transferred from the Community Funding Agency to WINZ as of July 1999. The move completes the mainstreaming all vocational placement services for people with disabilities. The first stage of the process began in July last year when it became WINZ's responsibility to buy vocational placement services for people with disabilities.

Private residential care providers funded by the Community Funding Agency now have confidentiality clauses attached to their contracts. The clause bars organisations from discussing the performance terms of their services, comparing their contracts, sharing databases or sharing any other information in regards to their contracts. The Federation of Voluntary Welfare Organisations says the clause is a gag order that threatens the community sector's co-operative approach to service delivery. It also limits the ability of community organisations to speak out on behalf of vulnerable clients. FVWO spokesperson Pip Desmond says the move is aimed at further fragmenting the voluntary sector at a time when the government has cut funding to their umbrella groups.

19 December 1998

Job losses are skyrocketing in London. The Guardian Weekly reports more than 80,000 jobs are likely to be recorded as being lost in the financial service sector. The number may be even larger than that, as companies aren't required to announce cut-backs of less than 100 jobs, or of any cut-backs to temporary contract workers.

21 December 1998

Housing NZ is planning to turn over the management of 600 houses and units in Cannons Creek, Porirua, to the Fanau Centre, a community trust. Housing NZ is sending letters to state house tenants in Cannons Creek asking them if they would like the trust or Housing NZ to be their landlord. Housing Minister Murray McCully says turning over the management of rentals to the Fanau Centre would end the near monopoly Housing NZ has had in Cannons Creek and may open doors to other similar deals elsewhere in the country. Housing NZ will provide assistance to the trust in the initial stages and will monitor its performance.

The University Graduate Destinations Report, which tracks the employment status of graduates, shows that 58.2% of those who responded were in full time employment six months after their 1997 graduation. The full-time employment of those with masters degree was 70.0%, and for those with doctorates it was 82.9%.

The details of the change in ACC rates are out. Workers will pay 14% more and employers will pay 9% less for ACC cover from April. After this second rise, ACC now costs workers twice what it did in 1997. McCully says he was disappointed to announce the high increase of the earner levy and he would be introducing plans to privatise the earner account early in 1999. The employer's account will be opened for competition in July 1999.

22 December 1998

Alliance MP Laila Harre lashes out at Murray McCully's ACC rise announcement. Harre says that the move is intended to undermine the public view of the state owned Accident Compensation Corporation by making its levies unreasonably high. At these inflated rates, the new private companies will certainly come in cheaper and be more attractive than ACC. Harre says that McCully is using the increases he has made on ACC levies as an argument for pushing forward faster with privatisation of accident compensation.

Enterprise and Commerce Minister Max Bradford announces the government will not raise the minimum wage from the current $7/hr for adults and $4.20/hr for youths. Bradford says raising the minimum wage would restrict work opportunities and risk job losses for those most vulnerable.

Alliance MP Laila Harre and Trade Union economist Peter Harris both dispute this. They say that research, even government commissioned studies of the causal effects of lifting the minimum wages, have found no negative effects on job creation or security. They also point out that raising the ACC rate and keeping the minimum wage the same amounts to a pay decrease for minimum wage workers.

23 December 1998

Official figures report that NZ is now out of recession. Growth in the September quarter was at 0.7%, a higher figure than all forecasts. The best news is the increase in exports of 3.6% during the period.

A ripple of concern runs through the community sector after papers are released under the Official Information Act saying the Community Funding Agency will have to pare $2m out of its existing programmes to help fund Family Start. Family Start is the new government initiative aimed at providing at-risk families with a family worker to help with parenting skills, money management, housing and access to services. But the government initiative did not receive full funding in the budget and the CFA must take $2m out its allocation funds to support Family Start.

While the Russian parliament looks set for a smooth passage of its budget, the IMF is warning of serious problems in the Russian economy. The IMF predicts Russia's economy will shrink by 8% in 1999 and that inflation is likely to hit 60%.

24 December 1998

Fletcher Challenge Forests' announces its Kawerau Remanufacturing Plant will begin working 24hrs/day, seven days/wk after labour contract negotiations have finally been completed.

25 December 1998

Christmas Day.

Church and community groups provide special free meals throughout NZ for the poor and alone.

26 December 1998

Japan records 4.4% unemployment, the highest rate since 1953 when data began being kept, and is the same level of unemployment as in the US.

27 December 1998

The Auckland University Student Association food bank gives a food parcel to a student bearing a letter from WINZ that acknowledges the student's hardship but says the student did not meet WINZ criteria for an emergency grant.

1 January 1999

The Euro becomes the common currency of eleven European countries. See feature in this issue.

5 January 1999

Reserve Bank governor Don Brash trumpets the NZ model of a central banking structure in a conference in the Philippines. Brash says the bank's policies have lowered expectations on inflation and stabilised the NZ exchange rate. Brash acknowledges that keeping NZ a low inflation country has created more unemployment and lessened economic output, but he denies monetary policy has been the only factor in this.

7 January 1999

Britain is facing the most severe teacher shortage in ten years and is eyeing NZ as a source of qualified teachers. This comes at a time when NZ is suffering a teacher scarcity itself and employs well over 1,000 foreign teachers. Some NZ educationalists are worried that salaries of about $NZ68,000 in the UK may be very tempting to NZ teachers who start on $NZ29,000 here.

More teacher shortages are also expected in the US over the next few years, as large numbers of teachers retire at about the same time.

10 January 1999

In France, La Tribune reports that Air France has signed an agreement to reduce the work week to 35 hours, expecting that this may result in the creation of 4,000 jobs.

11 January 1999

The Department of Social Welfare, as we current know it, will be scrapped by July this year. Minister of Social Services Roger Sowry says that a new Department of Child and Family will take its place. It appears that the DCF will be substantially smaller than the DSW and its emphasis will be more as a contractor, than as a provider, of services. Sowry says the move will strip away the structures of government so people can access help more easily.

Bernardos chief executive Ian Calder is enthusiastic about the opening of the provision of state services to competition. Bernardos already contracts a number of services to government. Calder says that if government provides the funding, then community groups offering the services is a step in the right direction.

Unions disagree, saying that the move will result in services to people being reduced. Public Services Association national manager, Joe Tonner says that the move is in line with the current government's ideological focus on reducing taxes by reducing government services. Tonner says the changes in social service delivery are going ahead without taking into account whether NZ will have an effective welfare system when it is done.

The Auckland Council of Social Services chairperson Richard Northey says he is concerned that no one will have overall responsibility for the care of at-risk children. Northey says if no one has overall responsibility for an individual child's welfare, then agencies that have contracted to provide a specific service may not have the capabilities of dealing with other problems that may arise.

The number of job ads in Australian newspapers in December hits a nine year high. The implication is that employers are intending to hire more people. But critics ask if Australian employers aren't shying away from the troubled, privatised Job Network and going direct to the situations vacant columns for staff.

WINZ sends out nearly 60,000 letters to spouses of invalids that many have found threatening. The message is that, unless their invalid spouse would have to be in hospital if they weren't there looking after them, they will need to start working or risk having their benefit cut. As of 1st of February, a person whose spouse is an invalid, and their youngest child is 14 or older, must work 30 hrs/wk or take part in training or work-for-the-dole. Those with children between 6 and 13 years must work 15 hrs/wk. Those people with pre-schoolers are required to meet with the department to prepare a plan for working in the future. WINZ spokesperson Helen Cowie says that if the invalids cannot look after themselves, the caregiver may qualify for an exemption.

Disabled groups are appalled by the letter and the confusion and fear it has generated. Disabled Peoples Assembly chief executive Dave Henderson says that government is disregarding the value and level of care that family members provide. Henderson says that while a programme of work outside the home may be fitting for some, it is wildly inappropriate for others. He says that government has not clearly thought out the consequences of such a regime.

12 January 1999

Consumer confidence is considered to have improved by the WestpacTrust McDermott Miller survey. Only 23.1% of respondents think the outlook is bad, substantially fewer than the 49.8% who thought things looked bad as we went into the previous quarter.

Business insolvencies are expected to continue to rise in the first part of this year, according to insolvency specialist Graeme McDonald. McDonald says that many businesses have been technically insolvent for the past six months while the economy was at its lowest, and that their neglected bills over that period will now catch up with them and pull them under. He says any new improvement in the economy will be too late for these businesses.

The monthly ANZ survey of job vacancies advertisements in NZ papers shows the number of ads increased in December but is down 11.1% on the same period a year ago.

Maori housing needs are not being met by government policy, says Minister of Maori Affairs Tau Henare. His comments come on the release of a Ministry of Maori Development report that accuses the Ministry of Housing of not monitoring the impact of the government housing policies on Maori. Deputy PM Wyatt Creech defends the policy saying that government spends $800m per year on housing and the accommodation supplement is an effective means of helping people on low incomes.

13 January 1999

Meat processor Affco is restructuring its stock carrying contracts and intends to sign only about 25 carriers. Currently about 190 contractors carry stock for Affco. According to Central Area Road Transport Association, the reduction will mean many smaller trucking firms will fold because, without stock carrying work, they will not have the critical mass to remain viable. CARTA executive officer Tom Cloke says that if small carrying companies lose the Affco business and go under, they will not be around to provide the other services they currently offer to farmers. Cloke says this will be a serious blow to rural NZ. Federated Farmers say the move might backfire on Affco. Taranaki president Kevin Thomas says that once farmers analyse the impact of Affco's move, they may decide to boycott the company.

14 January 1999

The Brazilian currency, the real, devalues by 8% as the government relaxes the band by which it pegged the real to the US dollar. Currency traders immediately withdraw $US700m with much more expected to follow. Analysts say interest rates may have to climb higher than their current 30% in order to stem the drain of funds that could bankrupt the country. The move causes most of the world's stock market's to dive. Analysts point out that cheap Brazilian exports flooding world markets will immediately result in lower returns for it's Latin American neighbours, but will soon depress the incomes all producing nations.

The devaluation of the real revives fears a global recession. To put the events in perspective, collectively, Asian `tiger economies' had debts of $US25 billion when their economies collapsed. Brazil itself has debts to US banks of $US39 billion.

15 January 1999

The Australian Bureau of Statistics reports that Australia's unemployment rate fell 0.5% to 7.5% at the end of November.

16 January 1999

A Nelson student who has been refused the community wage because by being ineligible for the student allowance has filed a legal challenge in the high court in Wellington.

17 January 1999

The Brazilian real is selling at 15% lower than it was one week ago after the government stops all attempt to peg the real to the US dollar. The real is now free-falling on the world currency market.

The British Labour government has received a windfall of almost £2 billion from unspent social security benefits during its first year in office. More than £910m of this was underspent on jobseekers' allowances.

18 January 1999

US retailers are facing their first legal challenge from human rights groups who want them to be accountable for hiring subcontractors who are abusing their workers. A human rights coalition, including Global Exchange and Sweatshop Watch, have picked the Pacific Island of Saipan (a US territory since WWII), as the focus for their legal challenge. Two federal class action suits and a companion suit in California state court seek more than $1 billion in damages, unpaid wages and returned corporate profits. They cite Gap, Sears Roebuck, Wal-Mart and Oshkosh B'Gosh as contracting sweatshops on the island which contains thousands of Asian workers held in servitude. Many of the workers are forced to work 12-hour days, seven days a week, while living under armed guard in cramped and foul lodgings. The factories are owned predominantly by Chinese and South Korean interests and employ mostly women from China, the Philippines, Bangladesh and Thailand.

19 January 1999

The "Turning Points: Managing Career Change" careers conference opens in Wellington.

A Massey University survey finds that most voters do not like how the first MMP government has turned out, but they are still keen on co-operation between political parties.

The Green party wants a moratorium on the building of new prisons. It says that NZ's prison population has doubled in the last 12 years, and nearly 80% of inmates re-offended soon after they got out. The party is calling for more investment in alternative methods of rehabilitation.

20 January 1999

Embattled US President Bill Clinton delivers his State of the Union speech. He plans to privatise part of the US Social Security funds, by investing up to $700 billion in the sharemarket. Since 1935, Social Security payments have only been invested in safe, low-interest federal government debt programmes. This new proposal has been criticised by the influential Federal Reserve Chairman Alan Greenspan who believes that such a large government-controlled investment in the markets will be contrary to free enterprise.

21 January 1999

The government says it is ready to fast-track settlement in the majority of Maori land grievances ... a move which will make the Waitangi Tribunal largely redundant.

22 January 1999

The Brazilian real continues to free-fall in its search for value in the open market. The Brazilian government decides to intervene and prop up the currency before the economic crisis pulls the rest of Latin America into the downward spiral.